As I suspected, the hard drive cable was bad in my 2009 MBP, which I've heard often can go bad for this year/model.
The hard drive worked fine on an external USB power source and hook up to a computer. The logic board was fine, as I was able to install OSX on the drive externally and launch it onto the MBP when holding the option key at startup and selecting the external drive. However, when trying it internally, it would not be recognized. After reading some material online, I figured out that it was the cable that went bad.
No joke, ifixit was the only site to have the part. It sounds like I'm working for them by praising them so well, but their guides and clean and organized site really made it easy to find what I needed and install the part. They also shipped it really fast. Prepared my order quickly and it was out for shipping within the next day.
After having messed around with getting to the hard drive many times earlier, installing the cable was a breeze. Not that hard for any moderately experienced computer savvy person.
Just a few small screws to take off the back cover, pop out the hard drive, the old broken cable, lay in the new one, GENTLY (it is very thin and surprisingly fragile, so be careful!), and reverse what you just did, and you'll have a functioning HD in no time.
If you suspect a bad hard drive or can't get OSX to start, but the computer still boots up, check the hard drive cable first! Don't send out your MB for repairs just yet! If you have symptoms like I described, you can almost be sure that it's the HD cable! Worth the $45 repair!